About

IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, with earlier application permitted (as long as IFRS 15 is also applied).

The objective of IFRS 16 is to report information that (a) faithfully represents lease transactions and (b) provides a basis for users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. To meet that objective, a lessee should recognise assets and liabilities arising from a lease.

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

What you should know

  • Know and apply the definitions related to leases.
  • Determine whether a contract contains a lease.
  • Distinguish between lessee accounting and lessor accounting.
  • Recognise and measure right-of-use assets and lease liabilities.
  • Account for lease payments, lease modifications and reassessments.
  • Apply the recognition exemptions for short-term leases and leases of low-value assets.
  • Present and disclose leases in the financial statements.
  • Explain the main accounting challenge for leases discuss the background of the current lease accounting standard
  • Explain the scope of the standard and the lessee exemptions
  • Eiscuss the definition of a lease and apply the definition to
  • Identify a lease account for leases from the perspective of a lessee
  • Describe the presentation and disclosure requirements for a lessee
  • Understand and apply the guidance necessary to classify leases from the perspective of a lessor
  • Account for finance leases from the perspective of a lessor
  • Account for finance leases by manufacturer or dealer lessors
  • Account for operating leases from the perspective of a lessor
  • Explain and account for sale and leaseback transactions